Japanese regular pay and bonuses rise in July

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Japanese summer bonuses rose in July and regular pay grew for the second straight month, government data showed, suggesting some firms are gradually raising wages.

Real wages, which are adjusted to reflect changes in consumer prices, slipped in July for the 13th straight month, but the pace of decline slowed from the previous month.

Wage earners' special payments, which are predominantly summer bonuses, grew an annual 7.1 percent in July after a revised 2.0 percent gain in June, data from the labor ministry showed.

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Japanese firms pay summer bonuses between June and August. A ministry official said summer bonuses were favorable so far this year compared with last year.

Regular pay rose 0.7 percent in July from the year before after a revised 0.2 percent gain in June, which was the first increase in 27 months, indicating regular pay may have hit bottom.

The wage report offers some relief for Prime Minister Shinzo Abe's government after recent weak economic data suggested that soft exports and a sales tax increase in April could drag on the economy longer than expected.

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"We need to watch closely whether wages will continue to rise but the situation is becoming more favorable for gradual wage increases," the official said.

The Bank of Japan considers wage growth as crucial in its battle to beat prolonged deflation and achieve its 2 percent inflation goal sometime in the next fiscal year starting in April.

Total cash earnings grew an annual 2.6 percent in July, up for the fifth straight month, after a revised 1.0 percent rise in June, the data showed.

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Overtime pay, a barometer of strength in corporate activity, rose 3.3 percent in the year to July, up for the 16th month in a row.

Japan's economy shrank by an annualized 6.8 percent in the second quarter, the biggest contraction since the March 2011 earthquake and tsunami, as the sales tax hike hit household spending.

Abe is to decide later this year whether to proceed with another sales tax hike in October next year to 10 percent from 8 percent, after examining July-September GDP and other data.

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The following table shows preliminary data for monthly incomes and numbers of workers in July:

The ministry defines "workers" as 1) those who are employed for more than one month at a firm that employs more than five people, or 2) those who are employed on a daily basis or have less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted at a firm that employs more than five people.